Companies typically utilize one or more advertising agencies to devise and implement one or more advertising plans on their behalf. In these plans, advertising agencies typically identify a number of goals and other information related to the plan. As used herein, the term advertising agency encompasses all business entities that engage in the practice of media buying.
For example, the plans will typically identify the media in which advertisements will run. Examples of media include but are not limited to television, radio, and print. The choice of the actual media properties, as well as the time and place in which the advertisements will run, is generally left to the discretion and expertise of the advertising agency. Examples of media properties include but are not limited to television networks, specific television stations, radio stations, newspapers, and magazines.
Further, the plans will typically identify the markets in which advertisements will run. Often, markets are identified in terms of designated market areas (DMAs). DMAs are well known in the field of advertising and typically encompass a core city and the surrounding area. Examples of DMAs include but are not limited to the St. Louis DMA (which would encompass the city of St. Louis, Mo. and nearby surrounding communities in Missouri and Illinois) and the Miami/Fort Lauderdale DMA (which would encompass the cities of Miami, Fla. and Fort Lauderdale, Fla. as well as their nearby surrounding communities). Depending upon the scope of the advertising plan, multiple DMAs may be targeted by an advertising agency when executing a client's advertising plan.
Further, advertising plans will typically identify a target demographic and a desired level of exposure for that target demographic. A common target demographic for companies engaged in mass market sales is the age 18-49 demographic. However, as would be understood, the target demographic can be particularized according to virtually any trait, including but not limited to different age classifications, gender, occupation, heritage, income level, political preference, etc. Exposure levels for television and radio advertising are typically expressed in terms of target rating points (TRPs). One TRP is well-known in the art to be one percentage point of the number of people estimated to be viewing a television/radio spot versus the number of people who could be viewing the television/radio spot. For example, if market A includes 100,000 people who could be watching television and an advertisement is run on a particular TV channel at a time when 50,000 people in market A are watching that channel, that advertisement will have achieved 50 TRPs. Exposure levels for print advertising are typically expressed in terms of circulation for the print item.
Advertising plans will typically identify a target number of total TRPs and/or a total amount of circulation desired for various advertisements during a specified time period (year, quarter, month, etc.). The budget for an advertising plan can then be expressed in terms of cost per TRP or cost per thousands of circulation (CPM), wherein a total cost for the advertising plan is expressed as the sum of (1) a total number of TRPs desired multiplied by the average cost of a TRP, and (2) a total amount of desired circulation (in the thousands) multiplied by an average CPM.
Once the expected cost for the advertising plan is calculated by the advertising agency and approved by the client, the advertising agency sets out to purchase the plan. Agencies execute clients' advertising plans by purchasing advertisement time/space with media properties. For TV/radio ads, advertisement times are usually requested in terms of dayparts. A daypart is a component of a day that relates to a specific time period. Dayparts are well known in the art, and common dayparts include, but are not limited to: morning, daytime, early fringe, early news, prime access, prime, late news, weekend, sports, etc. However, it should be noted that different entities may use different definitions for daypart components. For example, one media property may consider early fringe to begin at 4:30 pm CST and end at 5:00 pm CST, while a particular advertising agency may consider early fringe to extend from 4:00 pm CST to 5:00 pm CST. For print ads, advertisement placement is usually specified in terms of page placement.
The advertising agency's initial attempt to purchase advertisement time/space with media properties can be referred to as an original buy. Media properties generally have the final say on what gets aired, and media properties will often shuffle advertisement requests or fail to air advertisement requests included in the original buy for a variety of reasons (scheduling demands, better offers coming along, etc.).
After the shuffling settles following the original buy, the advertising agency places its final buy with the various media properties. Final buys correspond to final requests for advertisement spots placed with media properties by an agency. Once again, there is no guarantee that all elements of the final buy will be carried out as desired by the advertising agency because the media properties may make further alterations. The cost for a final buy is typically based on the cost per spot for the time at which the advertisement is to run.
Once the advertisements actually run, data corresponding to these actual advertisements are expressed in the actual buy. The actual buy TRP value for each actual advertisement can be determined from independent sources such as Nielsen TV ratings and Arbitron radio ratings, and represents the number of TRPs achieved by the airing.
As for costs, media properties typically bill advertising agencies for their clients' advertisements at the end of the standard broadcast month (based on a final Sunday per month cycle). The agencies typically receive their bills from the media properties by the 20th of the month following the previous month's activity. Clients are typically pre-billed by the agencies throughout this process. Pre-billing to the client from the advertising agency typically occurs the first day of the month of the purchased activity, and the pre-bill is based on the estimated costs for the month billed. The portion of the client's payment to the agency that is to be applied to media property invoices is deposited in a financial account by the agency. As invoices are received from media properties and verified for accuracy by the agency, payments are made to media properties for their invoices from the financial account. Billed costs in media property invoices are typically based on unit costs as generated by the media property. Unit cost is typically a derivative of the estimated target rating point (TRP) multiplied by the cost per rating point.
It is believed by the inventors herein that a typical account receivable time period in the advertising industry for payment to media properties on media property invoices received by advertising agencies is around 90 days. During this lengthy account receivable period, the client's money (which was pre-billed by the agency) sits in the account maintained by the agency, where it earns interest. This interest is typically kept by the agency and represents a perk for agencies that creates a disincentive for prompt payment of media property invoices. It is believed by the inventors herein that the interest on these accounts amounts to a yearly boon to the advertising agency industry upward of $40 billion.
This interest is believed to represent a “hidden” cost to clients of advertising agencies. That is, due to the time value of money, the delay that media properties experience in connection with payment of their invoices effectively results in a loss of potential income to the media properties, which is believed to translate into higher advertising prices being passed on to clients.
Accordingly, the inventors herein believe that a need exists in the art for a new system that can decrease the delay experienced between the time a media property advertising invoice is received and the time that the media property advertising invoice is reconciled and paid. Also, in the past, attempts to accurately audit the performance of advertising agencies in carrying out the advertising plans of their clients throughout the process described above have been difficult.
Often, the advertising agency would provide its client with a self-audit of its own performance. However, due to the conflicts of interest inherent in such self-audits, these audits have not proven valuable to clients as an objective measure of an agency's performance because, more often than not, the self-audits would inevitably establish a wonderful performance by the agency.
With respect to independent advertising agency audits conducted by unbiased third parties, the task of assembling an audit report has proven to be a gargantuan task requiring tedious efforts by teams of auditors. To perform such an audit, these auditors are required to pore through and make sense of volumes of paper documents that relate to advertisement postings by advertising agencies. Because of the massive manpower required for these efforts and because of the unsatisfactory lack of detail and flexibility in these conventional independent audit reports, the inventors felt there was a great need in the art for an improved method of objectively auditing advertising agencies to evaluate their performances in executing their clients' advertising plans.